Chronicling 100 Years of the U.S. Economy

December 2021
Volume 101, Number 12

GDP and the Economy

Second Estimates for the Third Quarter of 2021

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Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the third quarter of 2021, according to the second estimates of the National Income and Product Accounts (NIPAs) (chart 1 and table 1).1 With the second estimate, real GDP growth for the third quarter was revised up by 0.1 percentage point from the advance estimate. In the second quarter of 2021, real GDP increased 6.7 percent.

The increase in real GDP in the third quarter reflected increases in private inventory investment, consumer spending, state and local government spending, and nonresidential fixed investment that were partly offset by decreases in residential fixed investment, federal government spending, and exports.2 Imports, which are a subtraction in the calculation of GDP, increased.

  • The increase in private inventory investment reflected increases in wholesale trade (led by nondurable goods industries) and in retail trade (led by motor vehicles and parts dealers).
  • The increase in consumer spending reflected an increase in services that was partly offset by a decrease in goods.
    • Within services, increases were widespread, with the largest contributions coming from “other” services (mainly international travel), transportation services (notably, air transportation), and health care (notably, nonprofit hospitals).
    • The decrease in goods primarily reflected a decrease in spending on motor vehicles and parts.
  • The increase in state and local government spending was led by employee compensation (notably, education).
  • The increase in nonresidential fixed investment reflected an increase in intellectual property products (led by software and research and development) that was partly offset by decreases in structures and equipment.
  • The decrease in residential fixed investment primarily reflected decreases in improvements and in new single-family structures.
  • The decrease in federal government spending primarily reflected a decrease in nondefense spending on intermediate goods and services after the processing and administration of Paycheck Protection Program loan applications by banks on behalf of the federal government ended in the second quarter.
  • The decrease in exports reflected a decrease in goods that was partly offset by an increase in services.
  • The increase in imports primarily reflected an increase in services (led by travel and transport).

The 2.1 percent increase in real GDP in the third quarter followed an increase of 6.7 percent in the second quarter. The deceleration in real GDP in the third quarter was more than accounted for by a slowdown in consumer spending. From the second quarter to the third quarter, spending for goods turned down (led by motor vehicles and parts) and services decelerated (led by food services and accommodations).

Real gross domestic income, which is the sum of incomes earned and costs incurred in the production of GDP, increased 6.7 percent in the third quarter after increasing 4.3 percent (revised) in the second quarter.

Prices for gross domestic purchases—goods and services purchased by U.S. residents—increased 5.5 percent in the third quarter after increasing 5.8 percent in the second quarter (table 2 and chart 3). Except for private inventory investment, software investment, and “other” information processing equipment (specifically, medical equipment and instruments), price increases were widespread across the components of gross domestic purchases and were led by increases for consumer goods and services.

Within consumer goods, prices for both durable and nondurable goods increased. The leading contributors were price increases for motor vehicles and parts (for both new and used motor vehicles), food and beverages purchased for off-premises consumption (groceries), and gasoline and other energy goods.

Chart 3. Prices for Gross Domestic Purchases

[Click chart to expand]

Within gross domestic purchases, food prices increased 7.9 percent in the third quarter after increasing 1.6 percent in the second quarter. Prices for energy goods and services increased 19.3 percent after increasing 21.2 percent. Gross domestic purchases prices excluding food and energy increased 5.0 percent after increasing 5.6 percent.

Consumer prices excluding food and energy, a measure of the “core” rate of inflation, increased 4.5 percent in the third quarter after increasing 6.1 percent in the second quarter.

 

Measured in current dollars, personal income increased $132.8 billion in the third quarter, in contrast to a decrease of $1.20 trillion in the second quarter (table 3). The increase primarily reflected an increase in compensation that was partly offset by a decrease in government social benefits to persons.

  • Within compensation, both private and government wages and salaries increased.
  • Within government social benefits to persons, unemployment insurance and “other” social benefits decreased, reflecting decreased economic impact payments to households established by the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act. The addenda lines in table 3 include detail on the effects of selected federal pandemic response programs on personal income.

Personal current taxes increased $86.7 billion in the third quarter after increasing $120.4 billion (revised) in the second quarter.

Disposable personal income (DPI) increased $46.1 billion in the third quarter after decreasing $1.32 trillion in the second quarter (revised). Personal outlays increased $279.4 billion after increasing $689.4 billion.

The personal saving rate (chart 4)—personal saving as a percentage of DPI—was 9.6 percent in the third quarter, compared with 10.9 percent in the second quarter (revised).

Real DPI (chart 5) decreased 4.0 percent in the third quarter after decreasing 29.1 percent in the second quarter (revised). Current-dollar DPI increased 1.0 percent after decreasing 24.5 percent (revised).

In addition to presenting updated estimates for the third quarter, this estimate presents revised estimates of second-quarter wages and salaries, personal taxes, and contributions for government social insurance, based on updated data from the Bureau of Labor Statistics Quarterly Census of Employment and Wages program. Wages and salaries are now estimated to have increased $301.2 billion in the second quarter, an upward revision of $101.3 billion. Personal current taxes are now estimated to have increased $120.4 billion, an upward revision of $17.7 billion. Contributions for government social insurance are now estimated to have increased $38.4 billion, an upward revision of $13.5 billion. With the incorporation of these new data, real gross domestic income is now estimated to have increased 4.3 percent in the second quarter, an upward revision of 2.0 percentage points from the previously published estimate.

 

In the second estimate for the third quarter, real GDP increased 2.1 percent, an upward revision of 0.1 percentage point from the advance estimate. Upward revisions to consumer spending, private inventory investment, and state and local government spending were partly offset by downward revisions to exports, nonresidential fixed investment, residential fixed investment, and federal government spending. Imports, which are a subtraction in the calculation of GDP, were revised down.

  • Within consumer spending, an upward revision to goods was partly offset by a downward revision to services.
    • Within goods, the leading contributor to the upward revision was motor vehicles and parts (notably, net purchases of used motor vehicles).
    • Downward revisions to services were widespread, led by “other” services (mainly personal care services) and transportation services.
  • The revision to private inventory investment was led by upward revisions to wholesale trade (notably, farm products and electrical goods) and “other” industries (notably, information).
  • The revision to state and local government spending primarily reflected an upward revision to structures investment (notably, highway and street construction).
  • Within exports, goods were revised down, led by industrial supplies and materials (notably, durable goods).
  • Within nonresidential fixed investment, a downward revision to intellectual property products was partly offset by upward revisions to structures and equipment.
    • The downward revision to intellectual property products reflected downward revisions to software investment (notably, prepackaged software) and to research and development.
    • Within structures, the leading contributor to the upward revision was investment in commercial and health care structures.
    • For equipment, the leading contributor to the upward revision was information processing equipment (notably, computers and peripherals as well as communication equipment).
  • Within residential fixed investment, the leading contributor to the downward revision was improvements.
  • Within imports, the leading contributor to the downward revision was travel services.

Measured in current dollars, profits from current production (corporate profits with the inventory valuation adjustment (IVA) and the capital consumption adjustment (CCAdj)) increased $121.4 billion, or 4.3 percent at a quarterly rate, in the third quarter after increasing $267.8 billion in the second quarter (table 5). Profits of domestic financial corporations increased $13.8 billion, profits of domestic nonfinancial corporations increased $67.6 billion, and rest-of-the-world profits increased $40.1 billion.

Profits after tax (without IVA and CCAdj), BEA's profits measure that is conceptually most similar to the profits for companies in the Standard & Poor's 500 Index, increased $51.7 billion in the third quarter.

Also notable in the third quarter, subsidies, which are a subtraction in the calculation of gross domestic income, decreased in the third quarter quarter (see NIPA Table 1.12). Government pandemic assistance continued to support corporate profits and proprietors' income, but to a lesser extent than in previous quarters. Subsidies related to the Restaurant Revitalization Fund and for shuttered entertainment venues increased, while assistance from the Paycheck Protection Program declined. More information on federal subsidy programs and their impacts on income measures is presented in the table “Effects of Selected Federal Pandemic Response Programs on Federal Government Receipts, Expenditures, and Saving” on BEA’s website.

 


  1. “Real” estimates are in chained (2012) dollars, and price indexes are chain-type measures. Each GDP estimate for a quarter (advance, second, and third) incorporates increasingly comprehensive and improved source data; for more information, see “The Revisions to GDP, GDI, and Their Major Components” in the January 2021 Survey of Current Business. Quarterly estimates are expressed at seasonally adjusted annual rates, which reflect a rate of activity for a quarter as if it were maintained for a year.
  2. In this article, “consumer spending” refers to “personal consumption expenditures,” “inventory investment” refers to “change in private inventories,” and “government spending” refers to “government consumption expenditures and gross investment.”